Benefits Received under Phil. Tourism Authority's Separation Assistance Plan Exempt from Income Tax

September 13, 1999 BIR RULING NO. 142-99 142-99 Ms. Gilda P. Bengzon 9 Imao St., Corinthian Gardens Murphy, Quezon City M a d a m : This refers to your letters dated July 26, 1999 requesting for a ruling as to whether or not the benefits which you will receive from the 1999 Separation Assistance Plan of the Philippine Tourism Authority (PTA) is exempt from income tax. LibLex It is represented that the PTA offered its employees a Separation Assistance Plan for those who will resign or retire for the purpose of reducing the number of its employees and consequently cut down its cost on personnel services; and that you availed of the Separation Assistance Plan of the PTA and at the same time applied for optional retirement having served the PTA for 24 years and you are already above 60 years of age. In reply thereto, please be informed that pursuant to Section 32(B)(6)(f) of the Tax Code of 1997, benefits received from the GSIS under Republic Act No. 8291, including retirement gratuity received by government officials and employees shall not be included in gross income and shall be exempt from income tax. For officials and employees of the PTA who are already qualified to avail of the optional and/or compulsory retirement under Republic Act No. 8291, the payment of the Separation Assistance Plan benefits shall be considered as part of their retirement gratuity and therefore exempt from the payment of income tax pursuant to Section 32(B)(6)(f) of the Tax Code of 1997. However, for official/employees of the PTA who are not yet qualified to avail of the optional and/or compulsory retirement and who want to avail of the Separation Assistance Plan by resigning from their position, the benefits that they will receive under the Plan shall be considered as part of their compensation income which are subject to income tax and consequently to the withholding tax on wages under Section 79, Chapter XIII, Title II of the Tax Code of 1997. LexLib Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue